Senator Recommends That UBS Be Shut Down For Helping Thousands Of U.S. Citizens Cheat On Their Taxes

Another update to the disgruntled computer technician story: Sen. Carl Levin told ABC News that Swiss banking giant UBS’s banking license should be revoked until the bank “cleans up its act.” The bank is accused of arranging “undeclared” accounts for an estimated 19,000 US citizens, effectively “hiding” $18 billion from the IRS.

“I don’t think that any bank that goes to the extent that UBS has gone through to avoid doing what their agreements with the United States require them to do, should be allowed to continue to do business unless they clean up their act,” Levin said.

The Senator also revealed a list of “sneaky tricks” that the bank was using to skirt U.S. laws and provide services that it was not licensed to offer. Here’s the list:

Tax Haven Bank Secrecy Tricks

Code Names for Clients

Pay Phones, not Business Phones

Foreign Area Codes

Undeclared Accounts

Encrypted Computers

Transfer Companies to Cover Tracks

Foreign Shell Companies

Fake Charitable Trusts

Straw Man Settlors

Captive Trustees

Anonymous Wire Transfers

Disguised Business Trips

Counter-Surveillance Training

Foreign Credit Cards

Hold Mail

Shred Files

Prepared by the U.S. Senate Permanent Subcommittee on Investigations, July 2008.

One UBS banker has already plead guilty and admitted to (among other things) smuggling diamonds purchased using a US client’s Swiss bank account into the country by hiding them inside tubes of toothpaste. Classy!

@dtmoore: As someone who pays taxes so you and your kids can use our schools and hospitals, and police and fire dept, I don’t take to kindly to tax evasion. If you don’t want to pay taxes to the U.S., get the hell out, and good luck making your money in someone else’s country.

@snoop-blog: Which is why I am a firm supporter of consumption based taxes rather than a blanket income tax. Roads should be paid for with gas taxes, if you don’t have kids, you shouldn’t be paying for schools, you get the idea.

And as long as we’re talking about this great country, we revolted from england for taxation that was extremely minuscule compared to what we are paying today, not to mention the fact that the taxes we do pay go to programs which the federal government has absolutely no constitutional authority to run in the first place.

If you don’t want to understand your rights and duties as a citizen granted by the constitution and instead follow a unconstitutional government blindly, then seriously get the hell out of my country. You are just part of the problem.

@FilthyHarry: The interesting thing is, Tax revenues from this group of wealthy people actually go up when there are tax breaks, meaning more revenue collected than the IRS collected with the higher tax rate.

The reason is that it becomes less worth the risk, hassle, and cost to hide assets so as the rate goes down more money is declared and taxed and collected. As rates go up the money just “disappears” leading to the IRS actually losing money rather than gaining on the increase.

And just because we did something 100 years ago doesn’t mean it’s okay by today’s standards. Back then we owned slaves, is that American to you? Back then we killed the indians, so is that also acceptable to you? Give me a break, Justifying what these greedy bastards are doing by citing history that’s decades old? Who do you think you are fooling? Yourself that’s all.

If this was Best Buy or Circut City, Or boa, Or wal-mart etc. on here being accused of dodgeing taxes we’d all be in an uproar. Well this should be no different when it’s an individual evading taxes. I can tell you that if everybody quit paying taxes, there wouldn’t be anyone there to stop me from taking your money and beating your ass up.

@dtmoore: Roads should be paid for with gas taxes, if you don’t have kids, you shouldn’t be paying for schools, you get the idea.

Only problem with that thinking is that you indirectly benefit from these things in your community even if you don’t use them yourself. The road is a necessary infrastructure allowing you to have a fire department and police respond, allowing things to be delivered to you so you don’t personally have to use the road, etc. Same with the school. You benefit by having the kid at mcdonalds being able to add 2+2 even if it isn’t your kid, and you benefit by having informed people in the community making good decisions as an indirect benefit that is in your interest.

Pshh… UBS should be shutdown? Why are they being treated like the Umbrella Corporation? They didn’t cause a biohazard or anything. They helped thousands of Americans save money that would be otherwise wasted on pork politics… Wait this money is being wasted on pork, who do you think is pocketing lobbyist money?

It seems like there is a lot they should be doing before they even get to the criminal charges or fines.
They shoud start off by making UBS pay taxes on 18 billion at the highest rate, then track down the source of funds in these “undeclared” accounts and make those people pay the equivalent taxes at the highest rate, and possibly even confiscate all the “undeclared” money. After that they can dish out appropriate fines, jail time, or other punishments.

Seriously though, we need to get back to a healthy 90% tax rate for the richest 1% of this country. All of you saps that think that is so unfair because you have this pipe dream that you someday will be in that 1% need a heavy dose of reality. The 1% lives and feeds off of our labors every single day. Its time to make them pay!

@snoop-blog: Snoop, what makes you think BB, CC or BOA pays taxes? Many companies incorporate offshore or use a variety of shell companies to avoid taxes.

U.S. corporations shifted $75 billion of their profits into tax havens in 2003, depriving the IRS of between $10 billion and $20 billion in expected tax revenue, according to a study in Tax Notes, a tax trade journal [www.commondreams.org]

Don’t people understand, you can’t tax the superrich.
It just isn’t practical, they can, with very little overhead, afford to hire armies of lawyers and accountants to hid their assets.
They can afford to match the IRS toe to toe.

Which is why it’s absurd when people say we should “just tax the top 1% more”.
And if we enact really strict tax laws and do everything we can to seize the assets of the super rich, do you know what they will do?
They will just move their assets to Dubai, or Hong Kong.

Unconstitutional? Well, hate to break it to you, but the Supreme Court (you know, the organization whose job it is to determine these things) has found them Constitutional. You may not like that interpretation of the Commerce Clause. If you don’t, your options are:

1. deal with it2. leave3. get an amendment passed to clarify that your reading of the Commerce Clause is the one that should be used by the courts

This will most likely go nowhere fast. It would probably be a safe bet to assume that there are numerous senators, congressmen, judges, etc on that list that will make sure this doesn’t have legs to stand on.

I’m still for a consumption tax to replace the current income tax scheme. We would save plenty of money just on cutting out the IRS. (not sure what the current IRS budget is, but it is huge). We would have less incentive for people to try to hide money, cheat on their taxes, and more economic stimulation (take more money home, spend more money). It would encourage entreprenurial spirit (try to do small business taxes…the depreciation charts alone will make you cry). And people would be taxed based on consumption, which means if you want to buy a 2000 handbag, you’ll be taxed/punished accordingly. But if you want to save that money and invest it, you’ll be rewarded accordingly, which is currently NOT the case.

How exactly does an American senator plan to shut down a Swiss company? Sure they could shutter their US operations, but the money is all actually in Switzerland, and shutting down their American arm would seem to me to relieve them of any obligation to comply with US banking laws. Also, wouldn’t a Swiss bank tend to have a foreign area code anyway? (I’m guessing “+41″.)

I also wish I could have faith that all of my American bank’s computers used some sort of strong encryption, but I’m afraid I’m not that naive.

In fact, I used to live in Switzerland and I’ve still got CHF 34 in my UBS account. Excuse me while I go turn myself in. (I figure I’d better do it while Bush is still in office and high rollers like me can count on the support of the justice department.)

@dtmoore: I find it strange that Republicans are the first to talk about the Constitution when it comes to government programs and guns. Anything else (rights of privacy, warrants, trial by jury, civil rights, separation of church an state, etc.), suddenly, the Constitution is meaningless.

@Tmoney02: Ah, a loyal Bushie. Bush said that rich people would just find loopholes, so why tax them? By that logic, why prosecute fraud, people will still commit it. The key isn’t to throw your arms up and give up. Its to have laws, enforce those laws, and have penalties that strongly discourage this behaviour. With the current administration, criminality is essentially ignored when they don’t agree with the policy (see environmental prosecutions, civil rights prosecutions, etc.). So, while they didn’t cause this, they created an legal environment where the risk of getting caught is low and the penalties compared to the savings are even lower.

@theblackdog: Yeah, you know I have to kind
of agree. Personally, I would like to think that encrypted computers
and some form of file shredding (for old files/documents/etc.) would be
standard practice in general in the banking industry and not some form
of “secrecy trick.”

@JaguarChick: Amendment XVI of the Constitution allows the government to collect income taxes. While you may be in favor of it, it is not unconstitutional.

The budget of the IRS is 11.6 Billion. For comparison:

The Iraq war is 5 years and 500 Billion. So roughly 100 Billion per year. So the Iraq war is 10x more expensive than the IRS.

Oil companies will get around 5-8 Billion in tax breaks.

Where’s your outrage there?

How do we pay for Police, fire, infrastructure, etc.?

If they eliminated income tax and put in a VAT, poor people loose big time: 1) since they spend more of their money on necessities and it will be taxed at a higher rate, far outweighing any benefit from the elimination of the income tax burden. Most federal programs would be eliminated: No school, no health care, no scholarship, no training programs, nothing.

@Tmoney02: Do you have a source for that information? To me, the proposition of tax evasion wouldn’t be because I’m being taxed too much, but because I’m being taxed at all. If suddenly I only had to pay half my taxes, I still don’t think I’d say “that sounds okay. Here, this is some of the money I was keeping for myself. You can have it now.”

@Tmoney02: You also benefit from the moochers that sit on the welfare and don’t provide back to the community. What social benefit is there in blatantly telling the underprivileged that they can get something for free? A consumption tax at least recycles the responsibility, instead of putting it all on the shoulders of working people, as is the case with income tax. Of course, I can’t argue whether each is an “efficient” tax, only if it’s a “fair” tax.

I don’t like being taxed at all, but I doubt zero tax could even be realized. That puts the tax evaders on my naughty list. It’s just impossible to morally shrug this off as an okay thing to do, no matter how unfair it is.

@JaguarChick: I’m still for a consumption tax to replace the current income tax scheme.

I actually agree with the consumption tax replacing the income tax, at least in theory.

The question for me becomes how will revenues compare to income taxes? The real money comes from big ticket items, so will people buy their yachts from Canada rather than America and avoid the taxes? I guess the import taxes could go up but that would anger all our trading partners and destroy all the work the G-8 Summits and such have been working towards, open trading with no import taxes, allowing the world economy to be the most efficient it can be.
Also how would it affect the American market. Wall street is surviving by getting people to consume products they don’t need. By putting a big penalty on frivolous consumption how will the market cope? Of course considering the negative savings rate America has it seems like this problem is coming one way or another.

I am hereby stating a new law called “Tmoney’s law”
As a Usenet discussion grows longer, the probability of a comparison involving “Bushie(s)” or Bush approaches one.

Now hopefully you have thought about this law and said you know, perhaps calling a person a “Bushie” based on one policy opinion is pretty stupid. I should cool my jets.

Moving on to your point I actually gasp agree with you! We should do more to catch tax evasion and do everything we can, but on the other side we should recognize 1) enforcement can be very expensive and very difficult, especially in areas such as tax evasion.
2) It might be more cost effective by lowering the tax than spending tens of millions of man hours and dollars to only catch a fraction of the evaders.

@chrisjames: Nobody likes being taxed. Most of us are just smart enough to realize that it’s necessary to make any government and society actually work.

Plus, the “welfare queen” stereotype is pretty much just a strawman argument these days. No matter what kind of tax system you have, somebody is going to take unfair advantage of it, and people on every point of the economic spectrum will find their own ways to do so. This argument just distracts from discussing the actual purpose and necessity of taxation. The idea is to maximize benefit to everybody, while minimizing that kind of wrongdoing. Give me a system that works at 100% efficiency and I’ll give you a Nobel Prize.

@ARP: since they spend more of their money on necessities and it will be taxed at a higher rate, far outweighing any benefit from the elimination of the income tax burden. Most federal programs would be eliminated: No school, no health care, no scholarship, no training programs, nothing.

Two questions, Couldn’t we still have W-2’s and if your income is under a certain amount have some sort of general rebate?
Second wouldn’t the money collected in this consumption tax go to the federal government replacing the income tax money and thus allowing all those federal programs.

what a disgusting example of the government arbitrarily and selectively enforcing its rules. Also goes to show that the Swiss are too cowardly to fight back, the neutral bastards. People who chose UBS for the simple convenience of having numerous offices in the States are now being persecuted. And let’s not forget the proven thievery of LGT bank’s documents that is now used by the fascists in charge to file cases against people. Better move your assets to Panama.

@chrisjames: To your first point that may be true, except your ignoring the cost, convenience, and peace of mind factors. All the lawyers and Accountants and Banks you need to pay to make sure you don’t get caught add up in a hurry, especially since you only want to pay for the best of the best so you don’t get caught and go to jail. Also you lose money because it becomes harder to invest and if your lucky the money might get an interest rate to match inflation at best.

Then there is the convenience factor. You can’t just go to the ATM to get your money. You have to initiate a wire transfer and have your experts run it through your shell company’s and so you have more transaction fees and a wait.

So knowing that you have these issues avoiding the taxes when you see that instead of losing 90% of your money to taxes (as someone above proposed) you would only lose 50% it begins to look real appealing. You are already losing probably 25% or more to costs and not earning any money with that money. Plus you don’t have to live in fear of going to jail and can enjoy your money guilt free.

As for your second point, well i’m not sure where you were going with it. It kind of rambled so sum it up if you want.

@Tmoney02: Switching to a consumption tax instead of an income tax would also screw over everyone who invested in a Roth IRA. People who invested in traditional IRAs would look pretty smart, though. ;)

@failurate: Because our public school system is working so well? Honestly, ask any teacher and they will tell you to get the federal government uninvolved with the school systems. But how does the federal government have such influence you might ask? They take our tax dollars and proportion them out through the DoE, thus if local schools do not comply, they don’t get funding. If all school taxes were local (which I wouldn’t mind paying even though I don’t have kids, well less so than federal taxes) we would not have this issue.

p.s. my sister, mother, and quite a few friends are all teachers so I have a pretty good perspective on the whole thing.

…why is nobody paying attention to one very important relationship here?

Former Sen. Phil Gramm (made ‘mental recession’ comments last week) was on the board of directors of UBS until April 18, 2008, while simultaneously serving as a senior economic adviser to John McCain!!!

Did you know that Phil Gramm’s wife Wendy was a director at Enron — and was responsible for overseeing “audits,” while there?

@dtmoore: Yes! Parks can be paid for by charging admission, unemployment can be paid for by taxing unemployment checks, and prisons can be paid for by the prisoners… wait… or the victims? The victims! They’re the ones benefiting.

And soup kitchens can be paid for by cooking every 10th man in line.

Your taxes are insurance – they pay for many services you use , and some that (god willing) you’ll never need. You *are* your brother’s keeper, unless you want to live in a city of shantytowns, cardboard overpass villages, and untested and unsafe products with 0 liability for the makers.

@Tmoney02: You’re right, I jumped to the Bush comparison too fast. I apologize for that. However, your initial argument was almost exactly what he said and that’s why we should raise taxes on the wealthy. I agree, there is law of diminishing returns when it comes to law enforcement activities. However, I think we’re very far from it when it comes to creating a tax enforcement system. This would also apply to the war on drugs.

@Tmoney02:I’m OK with your proposal as long as there is a rebate at the bottom and a true income tax at the top with zero deductions, exemptions, etc., if you make more than X, every dollar over X is taxed at X rate. Oh, and bring back the inheritance tax (watches heads explode).

No, the only people who can argue with federal taxes on the basis of taxation without representation are DC residents. Although if I wanted to stretch it i could say our political system is so corrupt that even though I technically have an elected official, they are already bought and paid for by someone else thus not truly representing my best interests.

And I’m not saying that the federal government serves no purpose, they have just grown grossly bloated with programs and subsidies and the costs are just insane. Our military is obviously the worst offender, but there are many many others. We spend more on our military every year than the next 10 highest spending countries combined.

I’m not for the consumption tax but I have pondered how it might work. One pro of the consumption tax is you get rid of the IRS but wouldn’t you have to replace the IRS with a similar agency to collect all the consumption tax? And if you were going to try and make the consumption tax less regressive by giving poor people a rebate of some sort wouldn’t you need to also have an agency similar to the IRS to figure out who qualifies for a rebate, as someone suggested the gov would still need a copy of your W-2. A pro of consumption tax would be to reward frugal/green behavior. A possible con of such a tax is that it probably would encourage a heck of a lot of off the books transactions (maybe you would need to get rid of cash and move to a form of currancy – i.e. debit – that the gov. could track). Would you have to pay consumption tax on necessities (i.e. food, health care, etc.)?

The Fair Tax that most experts talk about would include some sort of “prebate” that would ease the burden on low-income consumers. Not sure exactly how it would work, but they would somehow get their relief up front, rather than having to save receipts on everything and file a return.

The thing I haven’t seen mentioned here would be that consumption taxes are a boon for bootleggers, i.e. organized crime. People will be looking for stolen, untaxed merchandise in order to save themselves paying the 25% VAT.

@dequeued: So then I guess you might as well just give your money away to some thug in your closest ghetto. I mean, if they do rob you, you’ll have no chance of stopping them anyway, right?

@dtmoore: While I agree that our government needs some serious tune-ups (Ted Stevens that a-hole and his bridge to nowhere… ) to imply that you get nothing because you don’t need to use public schools is ridiculous. Maybe you went to a private school your entire life, but if you didn’t, then you still owe the system for educating you. Additionally, where do you think this country would head if only people WITH kids paid for the education system? Our country would go third world in a heart beat. What you seem to lack, is a “big picture” mindset…

@LouDobbsChivasJersey: And the “Fair Tax” (a load of crap name if there ever was one…) wouldn’t bring in enough money to sustain the nation. We in the middle would end up shouldering the burden while the poor and rich got off easy.

@ARP: I love to see people go berserk when say I think the “inheritance tax” is a good thing. Technically, it’s an “Estate Tax” since the estate is taxed prior to being given to the beneficiaries…

Look at the real facts about the tax-
-you didn’t earn the money you’re receiving, it was a gift. It belonged to your parents (or whomever) and you did NOTHING to earn it. And even if you did, you’d still owe income tax on it…
-It only kicks in after $2 million. Most of us will NEVER see that… and it goes up to $3.5 million in ’09

Even if you don’t have kids, you’re personally benefiting from schools. You’re benefiting from an economy which depends on having them. Every time you get correct change you’re benefiting. You’re benefiting from having fewer kids idle during the day and vandalizing your car.

@dtmoore: While you may KNOW people that teach…. I am one. And I can say that federal funding is necessary. It isn’t the funding that we teachers complain about, it’s the bullshit rules enacted by Bush that we object to. Schools fail- cut off their money. Teach anything but abstinence… cut off the money. Not allow recruiters carte blanche… lose your funding.
Oh yeah, and NCLB… the biggest load of crap (which the dems sold us out on) you must comply, but we won’t fund you. It isn’t that the feds are funding schools… it’s who’s running the country right now.

If it weren’t for federal funding, plenty of poor counties and states would even worse off than they are now.

I have to pay fees for use of the roads, but wealthy people don’t have to pay for the regulation of their stock market. Businesses aren’t taxed to protect them from crime. Public schools are abolished, so we have to pay for our children’s education, but businesses don’t have to pay for having trained workers.

@dtmoore: I consider myself a libertarian, but I have to disagree with your ideas. Consumption based taxes are a regressive form of tax no matter what way you cut it.

At least in CA, all state revenue earned from gas tax is used only for road construction and traffic reduction.

Parents aren’t the only ones who benefit from a public education system–those schools are great for keeping kids out of trouble until they’re eighteen (i hope) and maybe even turn them into mindless patriotic zombies that will positively contribute to the economy and not commit crimes.

Should we minimize government intervention? Of course, but not in the areas you list.

@dtmoore: Which is why I am a firm supporter of consumption based taxes rather than a blanket income tax. Roads should be paid for with gas taxes, if you don’t have kids, you shouldn’t be paying for schools, you get the idea.

So your attitude is, only those who obtain benefits from the service should pay taxes? Okay:

Employers need educated employees, so all businesses should pay taxes for schools, not individuals. The less educated are more likely to commit crime, so anyone who wants a safe country should pay taxes for schools.

Those who use buses should pay a tax, as well as those who consume products transported by road at any time, i.e. everything.

You blather about personal responsibility yet what you are really attempting to obviate yours to society. Collective benefit is not collectivism.

@dtmoore: The problem with this user fee/consumption scheme is that it doesn’t quantify the indirect benefits and costs of government services. For example, having all people (even those who don’t have kids) pay for schools is cheaper than having them pay for jails instead. Parks and load-balanced and maintained roads contribute to cleaner air for everyone.

Yes, there is an element of unfair “redistribution of wealth” in the nation’s tax scheme, but there are many more tools that the wealthy use to redistribute wealth from the poor and middle clasee to them (three quick examples: payday loan financing terms, executive compensation in large corporations, UBS-style tax evasion).

@xkevin108x: If UBS had made their special services available to middle-class investors, maybe I would be considering them a hero. As it stands, the clients of these guys are profiting from (apart from things like diamond smuggling) government contracts for war materials and so on, loans to the government to pay for the contracts and leaving it to the rest of society to pick up the tab that the government leaves behind.

@xkevin108x: You and the other libertarians are more than welcome to move somewhere with no functional government. Of course, most of them look like something out of the “Road Warrior” without the glam makeup or infrastructure, but you can be free of the “nanny state” to go practise your “enlightened self interest” on each other.

As a person who gets paid to do people’s taxes, umm…don’t ditch the IRS, it’d KILL my income!

Seriously though, all this boo-hooing over the “death tax” (actually the Unified Transfer Tax) is something rather easily avoided and will only cost you approximately $2,000 of my time to do the estate planning and trust origination.

On the issue of income taxation as a whole, we kind of have to realize the cat is out of the proverbial bag. Half the reason why Guliani looked like such a tool (other than his inability to utter a sentence without including 9/11) is his desire to eliminate the IRS and other “unecesarry” federal agencies.

Um, the fed is responsible for employing nearly 25% of this country (be it through actual FIRS employees, contractors, and sub-contractors) and see how much President NY enjoys a budget without any real system to collect revenues other than the shoddy system of sales taxes, which are already easy to dodge if you deal primarily in cash.

@FCAlive:
Because they did it for us. So that we, their lineage, would not have to live the type of life they did, burdened by government oppression. And we’ve lost it. We had a free country and we gave it away. Laziness, wealth envy, and utter stupidity have cost us almost everything we have.

@Glamourdammerung:
While you may enjoy being a subject, many do not. The bigger the government here gets, the stronger the movement against it. I do not long for a country without a functional government. I long for a country with a functioning populous, absent of submissives like you.